TaxTMI 
TaxTMI 
2016 (12) TMI 1873
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....disallowance carried out by the Appellant amounting to Rs. 4,67 ,021/ - was not satisfactory. 1.2 The learned CIT(A) ought to have considered that the Appellant had sufficient own / interest free funds and an investment made ought to have been considered as made out of own interest free funds in absence of direct nexus between funds employed and investments made. 1.3 Without prejudice to the above, the Assessing Officer grossly erred in computing disallowance under rule 8D. 1.4 Without prejudice to the above, the disallowance u/s. 14A ought to be substantially reduced. 2. Re: Reducing disallowance made u/s. 14A while computing 115JB: 2.1 On the facts and in the circumstances of the case and in law, the learned CTT(A) ought to have considered that no disallowance u/s 14A is warranted while computing book profit u/s 115.JB. 2.2 Without prejudice to the above, the learned CIT(A) erred in upholding disallowing expenses attributable to earning the dividend income u/s. 14A by invoking Rule SD without satisfying or establishing as to why the disallowance carried out by the Appellant amounting to Rs. 4,67 ,021/- was not satisfactory. ....
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.... account of administrative expenses @ 0.5% of average investment). It was also noted by the AO that voluntary disallowance was made by the assessee of Rs. 4,67,021/- therefore, no disallowance of Rs. 1,24,28,099/- was made by him. In the appeal before the Ld. CIT(A), detailed submissions were made. It was inter-alia submitted by the assessee that assessee has got interest free sufficient funds. Therefore, no disallowance was called for on account of interest. Further, with regard to the expenses incurred it was submitted that assessee had already made voluntary disallowances of Rs. 4,67,021/- therefore, no further disallowance was required to be made. But, the Ld. CIT(A) did not accept the submissions of the assessee and confirmed the disallowance made by the AO with following observations:- "6.3 I have carefully considered the finding of the AO in the impugned assessment order and the above submission of the appellant. It is the claim of the appellant that interest bearing funds were not utilized for the, purpose of investments in shares. Since funds are mixed and both interest bearing as well as noninterest bearing funds goes to the common kitty and as the appellant did ....
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....f the assessee were apparently far more than the amount of investments in tax free securities. Under these circumstances, no disallowance can be made on account of interest in view of judgements of Hon'ble Bombay High Court in the case of CIT vs Reliance Utilities Ltd vs CIT (supra) and HDFC Bank Ltd (supra). Therefore, disallowance on account of interest of Rs. 1,16,01,605 is hereby directed to be deleted. 8. With regard to the disallowance of administrative expenses made by the AO of Rs. 12,93,515 computed @0.5% of average value of investment by invoking rule 8D(2)(iii), it is noted that though the assessee had made voluntary disallowance in the return filed by it, but before invoking the above said rule, the AO recorded following findings in the assessment order :- "11.2 The above submissions are considered carefully. With the introduction of section 14A of the Act, no expenditure incurred in relation to earning of income not forming part of total income, is allowable as deduction. The administrative and other expenses incurred by the Assessee Company facilitate earning of all incomes including the exempt income. The funds of business are a mix of own as well as ....
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....earing to the assessee to furnish required details of investments made in the group companies. The disallowance shall be made by the AO after excluding the amount of investment in group / subsidiary companies for working out the average value of investments. For the purpose of rule 8D(2)(iii). As a result, ground 1 is partly allowed. 11. Ground 2 is stated to be consequential to ground 1, therefore, it is dismissed. 12. Ground 3: This ground is with regard to the disallowance of depreciation on assets purchased from M/s Pravin Metal Corporation of Rs. 22,057/-. During the course of hearing it was brought to our notice that this issue has been set aside to the file of the AO vide order of the Tribunal for A.Ys 2005-06 to 2007-08 dated 06-02-2015. 13. We have gone through the order passed by the Tribunal for earlier years and noted that this issue has been sent back to the file of the AO to be decided in the light of directions contained in the earlier order of the Tribunal. We find it appropriate to send this issue back to the file of the AO to be decided afresh by the AO in the light of the directions given in the aforesaid order of the Tribunal. This ground may be treated....
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....bmission which shows that the rate per kg. was Rs. 15.37 and 15.69 exclusive of excise duty and other levies. Hence, to this extent, I find the contention of the appellant that the AO has erred in adopting the rate inclusive of taxes in the case of sister concern is acceptable. However, with regard to the different dates of purchases as contended by the appellant, I find the purchase from M/s.Ganesh Polychem Ltd. was in March, 2007 and with other two concerns it was in July, 2007.1_ feel there cannot be a great variation in rate within 3 months and purchase at different dates should not have a great impact on the rate of purchase. Further, the appellant did not bring any evidence to show that a favourable credit terms have been extended by the sister concern because of which, a higher rate was charged. In view of this, I am satisfied that the rate per kg. from M/s.Ganesh Polychem Ltd. should be adopted at Rs. 25.50 as against Rs. 30.89 adopted by the AO which has resulted in a difference of Rs. 5.39 per kg. which works out to 17%. To this extent, the which has resulted in a difference of Rs. 5.39 per kg. which works out to 17%. To this extent, the AO had made an excess disallowance....
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....d. CIT did not consider even this argument that impugned difference did not lead to any kind of suppression of income. 19. Per contra, the Ld. DR relied upon the orders of the lower authorities. It is noted by us that the assessee had submitted before the Ld. CIT(A) appropriate reconciliation wherein the reason was given for the difference and the same was duly reconciled. But, Ld. CIT(A) simply rejected the submission of the assessee by stating that he was not convinced with the submissions of the assessee. Thus, order passed by Ld. CIT(A) is neither properly speaking nor well reasoned. Under these circumstances, we find it appropriate to send this issue back to the file of the AO where the assessee shall get adequate opportunity of hearing to submit the reconciliation statement and other required details and evidences. The AO shall also consider all the arguments of the assessee including the arguments that the impugned difference is not leading to suppression of income, and therefore, no addition could be made on account of impugned difference. With these directions, this ground is send back to the file of the AO for deciding it afresh after giving adequate opportunity of hea....
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....laimed by the assessee on the basis of letter of approval dated 10-10-2010. 23. The brief background is that during the course of assessment proceedings it was found by the AO that assessee had claimed 40% depreciation on plant and machinery under Rule 5(2) of Income-tax Rules on scrutiny of Annexure-6 to form NO.3CD. Since the assessee failed to furnish details connected to the approval and certificate given by Department of Scientific and Industrial Research (DSIR) in respect of using any technology or other know-how developed in-house, the AO rejected the claim of the assessee. The AO made a mention that similar claims made during earlier year was also rejected. 24. In the appeal before Ld. CIT(A), the assessee submitted in detail that required approval from DSIR was received by the assessee and the same was produced before Ld. CIT(A). Submissions of the assessee made before Ld. CIT(A) are reproduced below "The submission of the appellant is as under:- "At the outset, we would like to state that the approval from DSIR as required by the under rule 5(2) has been received by the Appellant and same is enclosed herewith at page no. 30 to page no. 32 of the pa....
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.... Tribunal. Ld. DR could not point out anything incorrect or wrong in the factual finding of the Ld. CIT(A). Under these circumstances, we do not find any justification to interfere in the order of the Ld. CIT(A) on this issue. Thus, ground 1 raised by the Revenue is hereby dismissed. 27. Ground 2 : In this ground, the Revenue has challenged the action of Ld.CIT(A) in deleting the disallowance made by the AO of claim of weighted deduction of Rs. 64,22,951/- u/s 35(2AB)(3) of the Act. 28. Brief background is that during the course of assessment proceedings it was noted by the AO that assessee had furnished only a certificate received from the Chartered Accountant and certain correspondence with Ministry of Science and Technology to claim the weighted deduction u/s 35(2AB). He was of the opinion that the assessee has not fulfilled the necessary conditions laid down in clause (i) to (v) of the above section and since no evidences were brought before him to show that the assessee had entered into an agreement with the prescribed authority, the claim of the assessee was rejected by the AO. He has also mentioned that the relevant portion was left blank in Form No.3CL and hence, the ....
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...., respectfully following the decision of the Hon'ble ITAT, I direct the AO to allow the weighted deduction of 150%. The decisions relied on by the appellant also supports its case. This ground of appeal is allowed." 29. During the course of hearing before us, Ld. Counsel stated that this issue is covered in favour of the assessee by the decisions of the Tribunal for earlier years. Though in the earlier years, this issue was sent back to the file of the AO for the limited purpose of verification of order of approval in form 3CM, but in the year under appeal, the said approval in form 3CM was filed before the lower authorities, and Ld.CIT(A) had granted relief after verifying the same. Therefore, no purpose would be served in sending the matter back to the file of lower authorities especially when nothing wrong has been pointed out in the findings of Ld. CIT(A). 30. Per contra, the Ld. DR did not make any serious objection to the proposition. Under these circumstances, we find that the relief has been granted by the Ld. CIT(A) after verifying the requisite approval in proper form. Nothing wrong or contradictory has been brought before us by the Ld. DR. Thus, we do not find ....
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....e appellant has mentioned before the AO that loan was advanced to the subsidiary company for purpose of strengthening financial condition and thereby improving business since it was holding 51% of shares of Aarti Healthcare Ltd. and 86% shares of Avinash Drugs Ltd. Relying upon several judgements, the appellant further stated before AO that since interest free advances to subsidiary company have been given for the purpose of business of commercial expediency, disallowance cannot be made. It was also stated that the assessee has huge interest free funds and accumulated reserves. Detailed submissions have also been made wherein the commercial expediency has been explained. Identical issue had come up before my Ld. Predecessor in A.Y.2003-04 & 2004-05 and also undersigned for A.Y.2005-06 and 2006-07 wherein this ground of appeal was allowed relying on several judgements including that of SA Builders Ltd. 288 ITR 1. The facts of the case are identical and hence following these judgements, the AO is directed to allow claim of appellant of interest u/d.36(1 )(iii) of the I.T.Act." 5.5 Since there is no change in the facts and circumstances, following my predecessor's decisio....
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....refore, no substantial interest is required to be allocated to the said unit. The Ld. CIT(A) was satisfied with the submissions of the assessee, and therefore, he accepted the claim of the assessee and reversed the order of the AO on this issue by observing that allocation of interest should not be made on the basis of turnover by the AO. 39. During the course of hearing before us, the Ld. DR submitted that the basis adopted by the assessee and the Ld.CIT(A) were not rational for apportionment of interest and finance expenses. Under these circumstances, the Ld. Counsel was instructed by us to furnish the breakup of interest expenses as well as break up of asset base of both the units. In response, Ld. Counsel submitted the break-up of interest as under:- Sr.No. Particulars Total 1 Interest paid on Unsecured Loans 3,60,32,974 2 Interest paid on Working Capital Loans 25,61,18,560 3 Interest on Term Loans 7,05,53,202 Total interest 36,27,04,736 Further, with regard to break-up of assets employed, following particulars were submitted by the assessee:- Particulars Total 10B Non 10B % of 10B unit to total % of No....
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....O that assessee had made payment through credit card using American Express Bank Card aggregating to Rs. 16,77,803 but the assessee could explain the details for an expense upto Rs. 15,66,104. Thus, the remaining amount of Rs. 1,14,700 remained unexplained, and therefore the same was treated as expenses incurred for non-business purposes and was disallowed by the AO. 43. During the course of appeal before Ld.CIT(A), it was inter-alia submitted that assessee had debited expenses in the P&L Account to the tune of Rs. 15,66,105 only and thus, the amount of Rs. 1,14,700 was not debited to the P&L Account, therefore, disallowance has been wrongly made. After considering the submission of the assessee, Ld. CIT(A) allowed the relief to the assessee by observing as under:- "13.3 I have carefully considered the finding of the AO in the impugned assessment order and the above submission of the appellant. I find from the claim of the appellant that only a sum of Rs. 15,66,104/- was debited to the P&L account and the balance expense of Rs. 1,14,700/- was not debited at all is in order. It is the contention of the appellant that the balance being personal expense of the director, th....